Bitcoin so far this year has failed to live up to its status as ‘digital gold’, let alone as a safe haven during times of economic uncertainty, and has briefly dipped below US$30,000 for the first time in nearly a year.
Currently, the largest coin by market cap is trading at US$32,000, but analysts fear that the coin could continue to plunge further amid the backdrop of global uncertainty.
Flirting with the US$30,000, the token finds itself at an important part of its cycle.
According to Naeem Aslam, a market analyst at Avatrade, “if the price breaks the US$30,000 barrier it is highly possible that we may see some capitulation taking place and that could bring another wave-of intense sell-off for Bitcoin.”
How low can Bitcoin go?
Aslam believes should Bitcoin slip below US$30,000, the next level to keep an eye out for would be US$23,000.
Now, that isn’t to say Bitcoin will rebound at US$23,000 nor that it will slip below that level.
According to Edward Moya, an analyst at OANDA “Bitcoin's tentative breach of $30,000 attracted buyers, but the rebound was not robust and still leaves the world's largest crypto vulnerable to another plunge.”
However, he sets the stall slightly higher, and believes further bond market sell-offs would only see the asset fall to US$28,500.
Aslam sees the positive in the current trading price and even suggests that “Bitcoin is the biggest bargain of the century and investors need to know that they may not have an opportunity like this.”
Bargain hunting is exactly what El Salvador did, with the president buying an extra 500 tokens as the price dipped below US$30,000.
El Salvador’s enthusiasm and belief aren’t widespread, however.
No longer a safe-haven?
Bitcoin was, for a long time, viewed as a haven asset, an alternative to gold even and an asset to hold in times of economic uncertainty.
At the start of the pandemic, that idea seemed to play out as Bitcoin raced from just under US$10,000 in March 2020 to an all-time high of US$64,000 in November 2021.
However, its status as a haven has been chipped away steadily and increasingly cryptocurrencies have mirrored the movements of equity markets, in particular the tech-laden Nasdaq.
That, according to analysts, is largely due to stock investors seeping over into digital currency, looking to jump on the hype that saw the bull rallies of last year.
Comparing Nasdaq’s movement to Bitcoins, it’s clear to see the resemblance, with the index down 26% so far this year, while the token is down 33%.
That may suggest why it lost its status as a safe bet and hedge against inflation, given the investors who are buying and selling equities and stocks are also buying and selling Bitcoin.
So, what next for Bitcoin?
Moya stresses that the outlook for Bitcoin isn’t as bleak as it seems.
“The outlook for Bitcoin over the next five years remains bullish as further crypto adoption still seems likely.”
Included in that adoption would be adoption by Central Banks of their own digital currency (CBDC), Moya adds.
CBDC’s “should be great news for Bitcoin,” with Moya saying “the future won't have one cryptocurrency, but several top ones and one can make the argument that Bitcoin is still in a good position to be one of the ones that succeed.”
However, the more immediate future spells more volatility “as global growth concerns could be a major drag for risky assets.”